The commercial real estate industry is bracing for a complex economic landscape in 2025, with industry leaders highlighting both challenges and opportunities at the recent MBA CREF 2025 conference in San Diego. The MBA Economic and Commercial Real Estate Market Outlook panel provided insights into the current state of the economy and the commercial and multifamily real estate finance markets, painting a picture of an industry at a crossroads.
One of the most significant challenges facing the industry is the looming maturity of $957 million in commercial real estate mortgages in 2025. This substantial figure, highlighted by Reggie Booker, Associate Vice President of Commercial and Multifamily Research at MBA, suggests a potential wave of refinancing activity on the horizon. Despite this challenge, there are positive signs in certain sectors, with multifamily originations showing a robust 27% increase compared to the previous year.
Mike Fratantoni, Chief Economist and Senior Vice President of Research and Business Development at MBA, acknowledged the likelihood of distressed transactions resulting from these maturities. However, he emphasized the silver lining, noting that these challenges could also create opportunities for savvy investors and lenders. Fratantoni summed up the complex economic environment, stating, "This macro environment is complex, with forces pushing us from one end of the trading range to the other. In a year, I predict we won't be much further along than we are now."
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The global economic outlook remains a concern, with central banks aggressively cutting rates in response to various pressures. While the U.S. economy has shown solid growth, experts anticipate a slowdown in GDP growth. The manufacturing sector, in particular, has shown signs of volatility, with a boom in December followed by a faltering performance in January.
The job market presents a similarly nuanced picture. Recent data shows a slowdown in payroll growth, coupled with a drop in the unemployment rate and an uptick in wage growth. However, Fratantoni cautioned against surface-level interpretations, noting, "The average duration of unemployment is increasing. While mass layoffs aren't happening, the job market is neither weak nor as strong as it might seem."
The household sector, particularly younger households, is showing signs of stress. Credit card delinquencies are on the rise, although overall household debt service remains low, thanks in part to pandemic-era refinances. Fratantoni also addressed the state of pandemic-era savings, suggesting that these funds have largely been exhausted. "The personal savings rate indicates that the savings are tapped out. Income growth isn't as robust as we would have expected," he explained.
Inflation remains a key focus for both the industry and policymakers. While inflation is trending towards the Federal Reserve's 2% target, progress has slowed in recent months. Fratantoni projected that inflation would reach the target within the next 12-18 months but emphasized that it remains too high for comfort.
The Federal Reserve's approach to managing inflation expectations was highlighted as crucial. "The Fed is focused on managing inflation expectations over the coming period, and consumer expectations are particularly important," Fratantoni noted. This focus underscores the delicate balance the Fed must strike in its monetary policy decisions.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
